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Non-stationary functional time series: an application to electricity supply and demand

Wednesday 15th January 2014 - 14:30 to 15:00
INI Seminar Room 1
One main feature of electricity spot prices is the frequent occurrence of spikes, that is, of periods of extreme prices that are typically short-lived and during which the spot price exceeds its normal level many times over. Such spikes occur usually if the supply and demand curves that determine the spot price meet in their steeper parts. For a better assessment of the risk in such situation we propose to include the complete supply and demand curves to forecast spot prices.

We model the spread between the supply and demand curve as a functional time series. The approach is based on a decomposition into eigenfunctions and model eigenvalues by a dynamic factor model. We find that the form of the spread does not remain stable over time but mostly evolves slowly over time. There are, however, few marked time points of sudden changes in the functional form of the spread. The project is ongoing work and the talk will cover some preliminary results.

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Presentation Material: 
University of Cambridge Research Councils UK
    Clay Mathematics Institute London Mathematical Society NM Rothschild and Sons